PETITIONER:
SHANKARLAL AGGARWAL AND ORS.
Vs.
RESPONDENT:
SHANKARLAL PODDAR AND ORS.
DATE OF JUDGMENT:
24/01/1963
BENCH:
AYYANGAR, N. RAJAGOPALA
BENCH:
AYYANGAR, N. RAJAGOPALA
IMAM, SYED JAFFER
SUBBARAO, K.
MUDHOLKAR, J.R.
ACT:
Company Law-Sate-Confirmed by Company Judge-Set aside by
Division Bench-Administrative and judicial orders-
Distinction-Discretion exercised by company Judge-
interference, on ground that certain factors were not
considered by him-Letters Patent Appeal against order of
Company JudgeWhether maintainable-Clause 15 of Letters
Patent of Calcutta High Court-Indian Companies Act, 1913 (7
of 1913), s. 202.
HEADNOTE:
Luxmi Spinning and Weaving Mills Ltd. was ordered to be
wound up compulsorily by an order of the High Court of
Calcutta on a petition of the first respondent, Shankar Lal
Poddar. Before the winding up order, the appellants
instituted a mortgage suit against the said company and
joint Receivers were appointed by the High Court. Later on,
joint Liquidators were appointed in the winding up
proceedings. The joint Liquidators applied for directions
regarding the sale of the assets and properties of the
company and the Court sanctioned the same. Tile sate was
held after complying with the requirements of law with
regard to advertisement. etc. The highest bid of Nandlal
Agarwalla was for Rs. 3,37,000/- and the bid of the
appellant firm was Rs.3,35,000/-. The bid of Nandlal was
accepted and he was directed to pay immediately 25% of the
bid money. As he stated that he had not brought cash, he
was allowed to go and bring the same. As he did not turn up
inspite of waiting for him for some time, the appellant firm
was asked to stand by their previous bid for Rs. 3,35,000/-
but they refused to do so. The property was then put up for
sale once again and the highest bid of the appellant firm of
Bansidhar Shankarlal for Rs. 2,25,000/- was accepted. The
sale was confirmed by the Company judge. The first
respondent filed an appeal against the order confirming the
sale and his appeal was allowed by a Division Bench of the
Calcutta High Court. The liquidators were ordered to re-
sell the property after due advertisement. The appellants
came to this Court by special leave against the decision of
the Division Bench.
The questions for consideration before this Court
were(1)Whether the order of the Company judge confirming the
718
sale was merely an administrative order passed in the course
of the administration of the assets of the company under
liquidation, and therefore not a judicial order subject to
appeal, (2) whether on a proper construction of s. 202 of
the Indian Companies Act it was a condition fort he
availability of an appeal that the order should be open to
appeal under cl. 15 of the Letters Patent of the Calcutta
High Court and if the above were answered in the affirmative
whether independently of s. 202, the order of the Company
judge in this case amounted to Judgement within cl. 15 of
the Letters Patent, and (3) whether the appellate court
acted improperly in interfering with the order of the
Company judge.
Held, that the order of the Company judge confirming the
sale was not an administrative but a judicial order. It is
not correct to say that every order of the Court, merely for
the reason that it is passed in the course of the
realisation of the assets of the Company, must always be
treated merely as an administrative one. The question
ultimately depends upon the nature of the order that is
passed. An order according sanction to a sale undoubtedly
involves a discretion and cannot be termed merely an
administrative order, for before confirming the sale the
court has to be satisfied, particularly where the con-
firmation is opposed, that the sale has been held in
accordance with the conditions subject to which alone the
liquidator has been permitted to effect it, and that even
otherwise the sale has been fair and has not resulted in any
loss to the parties who would ultimately have to share the
realisation.
It is not possible to formulate a definition which would
satisfactorily distinguish between an administrative and a
judicial order. That the power is entrusted to or wielded
by a person who functions as a court is not decisive of the
question whether the act or decision is administrative or
judicial. An administrative order would be one which is
directed to the regulation or supervision of matters as
distinguished from an order which decides the rights of
parties of confers or refuses to confer rights to property
which are the subject of adjudicating before the court. One
of the tests would be whether a matter which involves the
exercise of discretion is left for the decision of the
authority, particularly if that authority were a court, and
if the discretion has to be exercised on objective, as
distinguished from a purely subjective consideration, it
would be a judicial decision. It has sometimes been said
that the essence of a judicial proreeding or of a ‘judicial
order is that there would be two parties and a lis between
them which is the subject of adjudication, as a result of
that order or a decision on an issue between a proposal and
an opposition. Nodoubt it
719
would not be possible to describe an order passed deciding a
lis before the authority that is not a judicial order but it
does not follow that the absence of a lis necessarily
negatives the order being judicial. Even viewed from this
narrow standpoint, it is possible to hold that there was a
lis before the Company judge which he decided by passing the
order. On the one hand were the claims of the highest
bidder who put forward the contention that he had satisfied
the requirements laid down for the acceptance of his bid and
was consequently entitled to have the sale in his favour
confirmed, particularly so as he was supported in this
behalf by the Official Liquidators. On the other band,
there was the first respondent and the large body of
unsecured creditors whose interests, even if they were not
represented by the first respondent, the court was bound to
protect. If the sale of which confirmation was sought was
characterised by any deviation from the conditions subject
to which the sale was directed to be held or even otherwise
was for a gross undervalue in the sense that very much more
could reasonably be expected to be obtained if the sale were
properly held, in view of the figure of Rs. 3,37,000/- which
had been bid by Nandlal Agarwalla it would be the duty of
the court to refuse the confirmation in the interests of the
general body of creditors, and this was the submission made
by the first respondent. There were thus two points of view
presented to the court by two contending parties or
interests and the court was called upon to decide between
them, and the decision vitally affected the rights of the
parties to property Under the circumstances, the order of
the Company Judge was a judicial order and not
administrative one. and was therefore not inherently
incapable of being brought up it. appeal.
Held, also, that Letters Patent Appeal was competent. The
second part of s. 202 of the Indian Companies Act which
refers to “the manner” and “the condition subject to which
appeals may be had” merely regulates the procedure to be
followed in the presentation of appeals and of hearing them,
the period of limitation within which the appeal is to be
presented and the forum to which the appeal would lie and
does not restrict ox impair the substantive right of appeal
which has been conferred by the opening words of s. 202.
The words “order or decision” occurring in the first part of
s. 202, though wide, would exclude merely procedural orders
or those which do not affect the rights or liabilities of
parties.
Held, also that the appellate court did not act improperly
in interfering with the order of the Company judge The
Company Judge did not take into consideration the fact that
certain bidders had left at the time when the property was
put
720
up for auction once again. ‘The judges of the Division
Bench were justified in considering that the sale to the
appellants ought not to have been confirmed.
Madan Gopal Daga v. Sachindra Nath Sen (1927) I. L. R. 55
Cal. 262 reversed.
Bachharaj Factories Ltd. v. The Hiraji Mills Ltd., I. L. R.
(1955) Bom. 550 and Western India Theatres Ltd. v.
Ishwarbhai Somabhai Patel, 1. L. R. (1959) Bom. 295,
approved.
Asrumati Debi v. Kumar Rupendra Deb Raikot (1953) S. C. R.
1159 and State of Uttar Pradesh v. Dr. Vijay Anand Maharaj
[1963] 1 S.C.R. 1 referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 214 of 1960.
Appeal by special leave from the judgment and order dated
December 11, 1958, of the Calcutta High Court in Appeal from
Original Order No. 176 of 1956.
S.T. Desai, Himmatsinghka and B. P. Maheshwari, for the
appellants.
N.C. Chatterjee, B. M. Bagaria, M. V. Goswami for B. C.
Misra, for respondent No. 1.
1963. January 24. The judgment of the Court was delivered
by
AYYANGAR , J.-The principal point raised for consideration
in this appeal by special leave relates to the correctness
and legality of an order by a Division Bench of Calcutta
High Court refusing to confirm a sale by the liquidators of
the assets of a company which is being wound up. The
company in question-the Luxmi Spinning & Weaving Mills Ltd.-
a company incorporated under the Indian Companies Act-was
carrying on business at Calcutta. On a petition of the 1st
respondent-Shankarlal Poddar-made to the
721
High Court of Calcutta, this company was ordered to be wound
up compulsorily by order dated August 22, 1955. But before
this order was passed, certain matters had transpired to
which it is necessary to advert. The appellants claiming
that they had advanced loans to the company under two
registered deeds of mortgage and alleging that there had
been default on the party of the company in performing its
obligations as to payment of interest etc. under the said
deeds instituted a mortgage suit in the High Court of
Calcutta for the usual reliefs under 0. 34, Civil Procedure
Code. Pending the disposal of the suit they moved the Court
for the appointment of a receiver, and the second appellant
and the Managing Director of the company were appointed
joint receivers and they took possession of the assets of
the company.
By reason of this circumstance, when the order for winding
up was passed in August, 1955 though the Official Receiver
was appointed as Official Liquidator, still he was directed
not to interfere with the possession of the joint Receivers.
Subsequently by a further order dated September 8, 1955 two
independent persons who are respondents 2 & 3 before us were
appointed as joint Receivers in the suit and they were also
directed to function as joint Liquidators in the winding Up
proceedings.
The joint Liquidators applied for directions to the Court as
regards the sale of the assets and properties of the company
and the Court by an order dated December 20, 1955 directed
their sale by public auction after due advertisement in the
manner set out in the order and notice of this sale was
directed to be given to the appellants who had by that date
obtained a mortgage decree in their suit. At this stage it
is necessary to mention that in the winding up proceedings
the validity of the appellants’ claim as creditors and as
secured creditors is challenged,
722
and a claim by the State of West Bengal to arrears of
certain taxes in regard to which priority is claimed is also
pending Adjudication by the Company judge.
In pursuance of the aforesaid directions of the court Dated
December 20, 1955 the liquidators held certain auctions of
which it is unnecessary to refer since these
proved infructuous, but ultimately the appellants and others
agreed to have the sale of the Assets to be held free of all
charges and encumbrance and to their claims to security over
the properties being transferred to the sale-proceeds when
paid into Court. Consequention this agreement the Court
made an order on july 10, 1956 by which the joint
Liquidators were directed to sell the properties free of
all encumbrances, the sale proceeds realised being held in
Court to answer the claims of the creditors according to
such properties as might be determined by the Court.
The sale by public auction thus directed was duly advertised
to be held on September 8, 1956 at 2 p.m. The conditions
subject to which the properties were to be sold which were
approved by the Court included, inter alia, (1) that the
sale was subject to a reserve price to be determined by a
valuer and surveyor which however was not to be made scaled
known to the bidders but had to be kept in a cover until the
bidding was over, (2)the sale was subject to
confirmation by the Court, (3) that it was in the discretion
of the liquidators to accept or reject any bid, (4) as far
as possible the highest bid was to be accepted provided the
liquidators considered that the bid was for a sufficient
amount(5) immediately on acceptance of the bid by the
liquidators the bidder was required to deposit 25 per cent
of the amount of the bid in cash “in default whereof the
liquidators were at liberty to put up the property again for
sale”, (6) the purchaser was to pay the
723
balance of purchase moneys within two weeks from the date of
confirmation by the Court.
The sale was held as advertised. There were in all 36 bids
for lot No. 1 which consisted of’ the business and
properties of the company starting with a bid for Rs.
1,50,000/- from 8 bidders including the 1st appellant who
himself personally bid for Rs. 3,00,000/-. Thereafter there
was keen competition between one Nandlal Agarwalla and the
appellant firm of Bansidhar Shankarlal and after successive
bids by these two the highest bid reached was that by
Nandlal Agarwalla who bid for Rs. 3,37,000/-, the pen-
ultimate bid of the appellant firm being Rs. 3,35,000/-. No
further bids were offered and thereupon the joint
Liquidators accepted the bid of Nandlal and he was directed
to pay immediately Rs. 84,250/- this being 250/ of his bid-
money.This bidder, however, stated that he had not brought
the cash and then the Receivers offered to take instead a
cheque from his solicitors, if he so desired, but this also
the bidder declined and thereafter Nandlal Agarwalla left
the place giving the impression on those there, including
the joint Liquidators that he had gone to bring the money.
The liquidators waited for about 20 minutes but as he did
not turn up they again put up the property for sale. Before
doing so, however, they-the liquidators enquired of the
appellants whether they would stand by their previous bid
for Rs. 3,35,000/in which case they were informed that
theirs would be treated as the highest bid. They would not
agree and thereupon the liquidators put the property to
auction again and the starting bid was by the appellant firm
of Bansidhar Shankarlal who, as stated earlier, had, at the
former bidding, offered Rs. 3,35,000/- now starting the bid
with Rs. 1,50,000,/and after 8 more bids there were no
further bids beyond Bansidhars’ for Rs. 2,25,000/-. This
bid was accepted by the official liquidators subject to
724
confirmation by the Court after they ascertained by opening
the scaled cover received from the valuer that this amount
was not below the price for which the property could be
sold. Immediately on the acceptance being intimated
Bansidhar paid the amount required to be paid by the
conditions of the sale.
The liquidators took out a Master’s summons on September 11,
1956 stating these facts and prayed for an order from the
Company judge that the sale be confirmed or such other
directions be given as the Court may deem fit and proper.
The summons was opposed by the 1st respondent and the main
point urged by him was that when Nandlal Agarwalla’s bid was
accepted by the joint Liquidators, several others who had
come to bid for the property left the auction room under the
impression that that sale was going through and that the
subsequent sale at which the appellant was the highest
bidder was not such as could be confirmed by the Court.
‘the summons was heard by the Company judge-P.B. Mukharji,
J.and the learned judge passed an order acceding to the
prayer of the liquidators. to confirm the sale. Thereupon
the 1st respondent filed an appeal against the order
confirming the sale and also applied for the stay of
delivery of possession of the properties of the company to
the appellant. In the application for stay the appellate
court passed an order in these terms :
“On Bansidhar Shankarlal giving an undertaking
to this Court to purchase the property for Rs.
3,35,000/- should the appeal be allowed and on
Bansidhar Shankarlal depositing with their
Solicitors Rs. 16,000/- to be held by the
Solicitors free from lien and subject to
further order of this Court to abide by the
result of the suit challenging the mortgage in
favour of Bansidhar Shankarlal, there will be
no further orders in this application and
Bansidhar
725
Shankarlal will be entitled to possession of
the factory and its assets on a sum of Rs.
16,000/-being deposited with their
Solicitors.”
There were a few more directions made by the Court to which
however it is unnecessary to refer.
The appeal was allowed and the order confirming the sale was
set aside and the liquidators were directed to resell the
property after due advertisement. it is from this decision
of the Division Bench that this appeal has been preferred by
special leave.
Learned Counsel for the appellants urged before us the
following points :
(1) The sale by auction by the joint Liquidators effected
after obtaining the sanction of the Court on December 20,
1955 under s. 179 (c) of the Indian Companies Act, 1913 was
merely an act performed by them in the course of their
administration of the assets of -the company and the action
of the judge in confirming such sale also partook of the
nature of an administrative act, and not being a .judicial
order no appeal lay against it.
(2) Even if the order of the Company judge was a judicial
order, still it was not a judgment within cl. 15 of the
Letters Patent of the Calcutta High Court and so no appeal
lay to the Division Bench.
(3) No doubt, s. 202 of the Indian Companies Act permits
appeals against orders and decisions in the course of a
winding up but that provision is of no avail, because for an
order to be appealable under s. 202, it has, in the case of
an order of a Single judge of the High Court, to satisfy the
requirements of cl. 15 of the Letters Patent.
726
(4) Even if the order of Mukharji, J., was a judicial order
capable of appeal, still it was a discretionary order and
could not be interfered with by an appellate court merely
because they considered that it was not a correct order to
pass.
In the light of these submissions the questions to be
considered are : (1) whether the order of the Company judge
confirming the sale was merely an administrative order
passed in the course of the administration of the assets of
the company under liquidation and therefore not a judicial
order subject to appeal, (2) (a) whether on a proper
construction of s’ 202 of the Indian Companies Act it was a
condition for the availability of an appeal that the order
should be open to appeal under cl . 15 of the Letters Patent
of the High Court, (b) If the above were answered in the
affirmative, whether independently of s. 202 the order of
the Company judge in this case amounted to a judgment within
cl 15 of the Letters Patent, and (3) -whether the appellate
court acted improperly in interfering with the order of the
learned Company judge.
We shall deal with these points in that order. (1) First as
to the scheme of the relevant provisions under the Companies
Act. Section 179 of the Companies Act, 1913 specifies the
powers of the official liquidator. It enacts, to quote only
the words material for the present appeal :
“179. Powers of Official liquidator. The
official liquidator shall have power., with
the sanction OF the Court, to do the following
things :-
(a) ……………………..
(b) ……………………..
727
(c) to sell the immovable and movable
property of the company by public auction or
private contract, with power to transfer the
whole thereof to any person or company,
or to sell the same in parcels
‘Though s. 180 which reads :
“180. Discretion of official liquidator.-The
Court may provide by any order that the
official liquidator may exercise any of the
above powers without the sanction or
intervention of the Court……….
makes provision for eliminating the need for the sanction of
the Court required for action by the official liquidator
tinder s. 179, as such a power was not exercised in this
case this section may be left out of account. Section 183
of the Act makes provision for the exercise of control by
the Court over the liquidator and sub-s. (3) enables the
official liquidator to apply to the Court for directions in
relation to any particular matter arising in the winding up.
Section 184 of the Act requires the Court to cause the
assets of the company to be collected and applied in
discharge of its liabilities.
On the basis of these provisions, we shall proceed to
consider whether the confirmation of the sale was merely an
order in the course of administration and not a judicial
order. The sale by the liquidator “-as, of course, effected
in the course of the realisation of the assets of the
company and for the purpose of the amount realised being
applied towards the discharge of the liabilities and the
surplus to be distributed in the manner provided by the Act.
It would also be correct to say that when a liquidator
effects a sale he is not discharging any judicial function.
Still it does not follow that every order
728
of the Court, merely for the reason that it is passed in the
course of the realisation of the assets of the company must
always be treated , as merely an administrative one. The
question ultimately depends upon the nature of the order
that is passed. An order according sanction to a sale
undoubtedly involves a discretion and cannot be termed
merely a ministerial order’ for before confirming the sale
the Court has to be satisfied, particularly where the
confirmation is opposed, that the sale has been held in
accordance with the conditions subject to which alone the
liquidator has been permitted to effect it, and that even
otherwise the sale has been fair and has not resulted in any
loss to the parties who would ultimately have to share the
realisation.
The next question is whether such an order could be
classified as an administrative order. One thing is clear,
that the mere fact that the order is passed in the course of
the administration of the assets of the company and for
realising those assets is not by itself sufficient to make
it an administrative, as distinguished from a judicial,
order. For instance, the determination of amounts due to
the company from its debtors which is also part of the
process of the realisation of the assets. of the company is
a matter which arises in the course of the administration.
It does not on that account follow that the determination of
the particular amount due from a debtor who is brought
before the Court is an administrative order.
It is perhaps not possible to formulate a definition which
would satisfactorily distinguish, in this context, between
an administrative and a judicial order. That the power is
entrusted to or wielded by a person who functions as a Court
is not decisive of the question whether the Act or decision
is administrative or judicial. But we conceive that an
administrative order would be one which is directed’
729
to the regulation or supervision of matters as distinguished
from an order which decides the rights of parties or confers
or refuses to confer rights to property which are the
subject of adjudication before the Court. One of the tests
would be whether a matter which involves the exercise of
discretion is left for the decision of the authority,
particularly if that authority were a Court, and if the
discretion has to be exercised on objective, as
distinguished from a purely subjective, consideration, it
would be a judicial decision. It has sometimes been said
that the essence of a judicial proceeding or of a judicial
order is that there should be two parties and a lis between
them which is the subject of adjudication, as a result of
that order or a decision on an issue between a proposal and
an opposition. No doubt, it would not be possible to
describe an order passed deciding a lis before the
authority, that it is not a judicial order but it does not
follow that the absence of a lis necessarily negatives the
order being judicial. Even viewed from this narrow
standpoint it is possible to hold that there was a lis
before the Company judge which he decided by passing the
order. On the one hand were the claims of the highest
bidder who put forward the contention that he had satisfied
the requirements laid down for the acceptance of his bid and
was consequently entitled to have the sale in his favour
confirmed, particularly so as he was supported in this
behalf by the official liquidators. On the other hand there
was the 1st respondent and not to speak of him, the large
body of unsecured creditors whose interests, even if they
were not represented by the 1st respondent, the Court was
bound to protect. If the sale of which confirmation was
sought was characterised by any deviation from the
conditions subject to which the sale was directed to be held
or even otherwise was for a gross undervalue in the sense
that very much more could reasonably be expected to be
obtained if the sale were properly held in view
730
of the figure of Rs. 3,37,000/- which had been bid by
Nandlal Agarwalla, it would be the duty of the Court to
refuse the confirmation in ‘he interests of the general body
of creditors and this was the submission made by the 1st
respondent. There were thus two points of view presented to
the Court by two contending parties or interests and the
Court was called upon to decide between them. And the deci-
sion vitally affected the rights of the parties to property.
In this view we are clearly of the opinion that the order of
the Court was, in the circumstances, a judicial order and
not an administrative one and was therefore not inherently
incapable of being brought up in appeal.
(2) The next point for consideration is whether even if
this was a judicial order no appeal lay from it under s. 202
of the Indian Companies Act unless the order amounted to a
judgment within cl. 15 of the Letters Patent of the Calcutta
High Court. Section as follows :
“202. Appeals from orders.-Re-hearings of,
and appeals from, any order or decision made
or given in the matter of the winding up of a
company by the Court may be had in the same
manner and subject to the same conditions in
and subject to which appeals may be had from
any order or decision of the same Court in
cases within its ordinary jurisdiction.”
It was submitted that assuming the order of the Company
judge was “an order or decision made or given in the matter
of the winding up of a company by the Court” the last words
of the section “subject to the same conditions in and
subject to which appeals may be had from any order or
decision of the same Court in cases within its ordinary
jurisdiction” restricted the right of appeal conferred by
the 1st limb of the section to those which might be
preferred under cl. 15 of the Letters Patent in the case of
a judgment of a
731
Single judge of the High Court. In support of this
submission learned Counsel relied on the decision of the
Calcutta High Court in Madan Gopal Daga v. Sachindra Nath
Sen (1)- It was there held that an order made in the winding
up of a company by a Single judge of a High Court in order
to be appealable under s. 202 must satisfy the requirements
of cl. 15 of the Letters Patent, viz., that it must be “a
Judgment” within the meaning of that clause. C. C. Ghose,
J. rejected the construction that the words “same manner and
subject to the same conditions” occurring in s. 202 were
merely a reference to the procedure to be observed as
regards the manner of filing an appeal or the forum to which
the appeal lay and not the substantive right to prefer an
appeal. Buckland, J. who agreed with Ghose, J. considered
that though the word “manner” might refer to the procedure
for filing an appeal, the word “conditions” could not be
given any such limited meaning but would import a reference
to the limitation on the right to appeal itself as laid down
in cl. 15 of the Letters Patent where the order appealed
from was that of a judge of the High Court. It must be
mentioned that in the appeal now before us the objection
that no appeal lay from the order of Mukherji, J. was raised
before the Bench, but the learned judges rejected it on the
ground that the order of the learned judge was “a judgment”
within cl. 15 of the Letters Patent and so appealable under
that provision.
This interpretation of the scope of s. 202 of the Companies
Act has not been accepted by several other High Courts. The
leading case in support of the other view is Bachharaj
Factories Ltd. v. The Hiraji Mills Ltd.(2). The learned
judges were dealing with an appeal against an order of the
Company judge adjourning a petition for winding up in order
to enable certain shareholders to file a suit for a
declaration that certain debentures were not valid in law.
The
(1) (1927) I.L.R. 55 Cal. 262.
(2) I.L.R. (1955) Bom. 550,
732
Company Judge made the order under s. 170 of the Companies
Act which provides that on hearing a petition for winding up
the Court may dismiss or r adjourn the hearing conditionally
or unconditionally or make any interim order etc. A
preliminary objection was taken to the hearing of the appeal
on the ground that the order from which the appeal was
preferred was not a judgment within the meaning of cl. 15 of
the Letters Patent and therefore no appeal lay. It was
urged that under s. 202 the right of appeal conferred was
subject to “the same conditions” to which appeals might be
had from the decision of the Court in cases within its
ordinary jurisdiction and since the said condition was not
fulfilled the appeal was incompetent. Chagla, C. J.
repelled this contention and pointed out that the Courts
which dealt with winding up petitions and to whose orders s.
202 applied were not merely the High Courts but also the
District Courts. If the construction of the section on
whose correctness the preliminary objection was based were
upheld it would mean that in the case of an order made by a
District Court the appealability of that order would be
dependent on its satisfying the conditions of appeal for
“decisions” laid down under the Civil Procedure Code. Under
the Code “orders or decisions” are classified into two
heads-decrees and orders. Whereas an appeal lies by virtue
of s. 96 of the Code against every decree which is defined
in s. 2 of the Code, only certain types of orders under
particular provisions of the Code Which are listed in s. 104
are capable of appeal and Done others. It was ,not in
dispute that very few of the orders passed in a winding up
would amount to decrees within the Code. There was no doubt
either that most of the orders or decisions in winding up
would not be comprehended within the class of appealable
orders specified in s. 104 or 0. 43. r. I. if therefore the
contention of the respondent were accepted it would mean
that in the case of orders passed by the District Courts
appeals would lie only against what would be decrees under
733
the Code as well as appealable orders under s. 104 and 0.43.
r.1 and very few of the orders passed in the Courts of the
winding up would fall within these categories. On the other
hand, the expression “judgment” used in cl. I 5 is wider.
The learned judge pointed out that the position would
therefore be that a decision rendered or an order passed by
a District Court would not be appealable because the
conditions laid down by the Civil Procedure Code were not
satisfied, yet an exactly identical order or decision by the
judge of the High Court would be appealable because it might
constitute a judgment within cl.15. The learned judge
therefore rejected a construction which would have meant
that the same orders passed by District Courts and by a
Single judge of a High Court would be subject to different
rules as to appealability. The learned judge observed that
the right of appeal was conferred by the 1st limb of s. 202
and that the second limb merely dealt with the procedural
limitations of that appeal. He further pointed out that the
expression “order or decision” used in s. 202 itself
indicated that the order or decision was not merely
procedural in character but that which affected the rights
and liabilities of parties. The learned judge referred to
the decisions in Madan Gopal Daga v. Sachindra Nath Sen (1),
and the cases following it and expressed his dissent with
the reasoning which found favour with the judges of the
Calcutta High Court. The decision in Bachhraj Factories
Ltd. (2) was later followed by the same Court in Western
India Theatres Ltd. v. Ishwarbhai Somabhai Patel (3). We
find ourselves in agreement with the view here expressed.
Madan Gopal Daga (1), proceeds wholly on the meaning which
could be attributed to the word “conditions” in the
expression “subject to the conditions” occurring in s.202
and does not take into account the context in which s. 202
was designed to operate and particularly the fact that more
than one grade of Court each governed by different rules as
to the nature of the decision
(1) (1927) I.L.R. 55 Cal. 262. (2) I.L.R. (1955) Bom, 550.
(3) I.L.R. (1959) Bom. 295,
734
which would enable an appeal to be preferred could be vested
with jurisdiction under the Act. When by the proviso to s.3
of the Indian Companies Act, 1913 the Indian Legislature
enabled Jurisdiction to be vested in District Courts so as
to be constituted the “Court having jurisdiction under the
Act”, knowledge must be imparted to it that the District
Courts and the High Courts functioned under different
statutory provisions as regards rights of appeal from their
orders and decisions. Besides, it would also be fair to
presume that they intended to prescribe a uniform law as
regards the substantive right of appeal conferred by s. 202.
It could not therefore be that an identical order if passed
by one class of ” court having jurisdiction under the Act”
would be final, but that if passed by another Court vested
with identical powers and jurisdiction would be subject to
an appeal.
There is also one another aspect from which the problem
could be viewed. Taking first the provisions of the Civil
Procedure Code which would govern the orders passed by
District Courts; it would be seen that apart from “decrees”
which are appealable by reason of s. 96 of the Code,
“orders” are appealable in accordance with s. 104. That
section after enumerating certain orders which are made
appealable, contains a residuary clause (i) conferring a
right of appeal in respect of “any order made under rules
from which an appeal is expressly allowed by rules”-and the
rule referred to is 0. 43. r. 1. Now under s. 122 of the
Code each of the High Courts is vested with power “to make
rules, to annul, alter or add to all of any of the rules in
the 1st Schedule”. In exercise of this power High Courts
have in respect of the Civil Courts subject to their
appellate jurisdiction made alterations and additions in the
rules including those in 0. 4 3. r. 1 . either extending or
restricting the right of appeal conferred by the Code as
originally enacted. The question that arises on this
735
state of circumstances is whether the legislature, when it
enacted s. 202 of the Companies Act, intended that the right
of appeal should vary from State to State depending on the
particular rule in force in that State by reason of the
exercise by the High Court of its power under s. 122, Civil
Procedure Code.
The anomaly created by the construction urged by learned
Counsel for the appellant does not stop here. Even taking
the case of the High Courts themselves, the construction of
the word ‘condition’ as including the appealability of the
decision would lead to rather strange results. The relevant
words of s. 202 are :
“Subject to the same conditions…… to which
appeals may be had from any order or decision
of the same Court in cases within its ordinary
jurisdiction”-“ordinary jurisdiction” and not
((ordinary original jurisdiction.”
The question that would arise is as to what is meant by
“ordinary jurisdiction” of the Court. Plainly the words
would only exclude jurisdiction vested in the Court by
special statutes as distinguished from the statutes
constituting the Court. Undoubtedly; in the case of a High
Court the limits of ‘whose jurisdiction are governed by its
Letters Patent, the Letters Patent would determine what the
“ordinary jurisdiction” is. But that Letters Patent is not
immutable and has been the subject of several alterations.
Thus when the Companies Act was passed in 1913, an appeal
lay from every “judgment” of a Single judge of the High
Court. But in March 1919 it was amended so as to exclude
the rights of appeal from judgment passed in exercise, of
revisional jurisdiction and in exercise of the power of
superintendence under s. 107 of the Government of India Act,
1915. There can be no doubt either that the exercise of
revisional or supervisory jurisdiction is as much “ordinary
jurisdiction” of the High Court as its original or appellate
736
jurisdiction and it cannot be that there has been any
alteration in the law as regards the appealability of
dccisions of a High Court under s. 202 of the Companies Act
by reason of the amendment of the Letters Patent. Again,
the Letters Patent were amended in January, 1928 when
appeals against decisions in second appeals were made
subject to the grant of leave by judges rendering such
decisions. If the decision in a second appeal were in the
exercise of “ordinary jurisdiction” and there can be no
controversy about it, then the construction of s. 202 of the
Companies Act in relation to a High Court which is the
primary Court exercising jurisdiction under the Companies
Act (vide s. 3 (1) of the Act) would lead to anomalous
results as judgments or decisions rendered in different
types of cases, though all of them are in the exercise of
“ordinary jurisdiction”, are subject to different conditions
as regards appealability. We thus agree with Chagla, C. J.
that the second part of the section which refers to “the
manner” and “the conditions subject to which appeals may be
had” merely regulates the procedure to be followed in the
presentation of the appeal and of hearing them, the period
of limitation within which the appeal is to be presented and
the forum to which the appeal would lie and does not
restrict or impair the substantive right of appeal which has
been conferred by the opening words of that section. We
also agree with the learned judges of the Bombay High Court
that the words “order or decision” occurring in the 1st part
of s. 202, though wide, would exclude merely procedural
orders or those which do not affect the rights or
liabilities of parties. Learned Counsel for the appellant
did not suggest that if this test were applied the order of
the learned Company judge would be an order or decision
merely of a procedural character from which no appeal lay.
On the footing that we accepted the construction of s. 202
of the Companies Act which found
737
favour with the learned judges of the Calcutta High Court in
Madan Gopal Daga (1), that in order to be appealable the
decision must satisfy the test of being “‘a judgment” within
cl. 15 of the Letters Patent of the High Court, learned
Counsel submitted to us elaborate arguments as to what was
comprehended within the expression r ‘judgment” in cl. 15 of
the Letters Patent and invited us to hold that the order of
Mukharji J., confirming the sale was not a judgment and that
the decision of the learned judges in the judgment now under
the appeal that it was “a judgment” was erroneous. There
has been very wide divergence of opinion between the several
High Courts in India as to the content of the expression
“‘.judgment” occurring in cl. 15 of the Letters Patent.
This conflict of opinion was referred to by this Court in
Asrumati Devi v. Kumar Rupendra Deb Raikot (2), and in,
State of Uttar Pradesh v. Dr. Vijay Anand. Maharaj (3)
where, after setting out the cleavage of views on the
question by the several High Courts, the points as to the
proper construction of the word was left open for future
decision when the occasion required. We consider that that
occasion has not arisen before us either since in view of
the construction which we have adopted of s. 202 of the
Indian Companies Act the scope of the expression “‘judgment”
in the Letters Patent does not call for examination or final
decision.
The next contention put forward was this. The learned
Company judge had a discretion to confirm or not to confirm
the sale. In order that the discretion might be properly
exercised the official liquidators had placed every meterial
fact in the Master’s summons which they filed and every one
of those facts had been considered by the learned judge.
If, after considering those facts, the learned judge thought
that it was a fit case in which the sale could be confirmed
it was not open to an appellate court to interfere with that
order merely because on its
(1) (1927) I. L. R. 55 Cal.262 (2) [1953] S.C.R. 1159.
(3) [1963] 1 S.C.R. 1.
738
appreciation of the facts it would have refused confirmation
and directed a fresh sale. Learned Counsel further
submitted that if the Company judge had applied his mind to
the facts and every fact was before him the order passed in
the exercise of his discretion could be interfered with only
if any relevant facts were disregarded or if the order was
arbitrary or capricious or if the appellate court considered
that there has been a miscarriage of justice and his
submission was that on the facts of this case no such
infirmities attached to the order confirming the sale.
Before considering the objection in this form it would be
proper to examine whether the liquidators were within their
power in proceeding with the sale after Nandlal Agarwalla
failed to turn up after an .appreciable interval. The power
of the liquidators in this behalf was, according to the
learned Counsel for the appellant, derived from cl. 5 of the
conditions of sale which reads : –
“5. Immediately on acceptance of the bid by
the.joint Receivers and Liquidators subject to
clause I hereof, such bidder shall deposit 25
percent, of the amount of such bid with the
Joint Receivers and Liquidators in cash, in
default where of the joint Receivers and
Liquidators will be at liberty to put up the
property again for sale.”
We might add that this is the only clause under which, on a
sale becoming abortive, the liquidators were empowered to
continue the sale without a fresh advertisement. It would
be seen that this clause requires the bidder whose bid is
accepted to deposit immediately 25% of the id amount. In
the context of the fact,; that transpired in the present
case the significance of -the word immediately’ would become
clear. If on the failure of Nandlal to make the
739
deposit immediately the liquidators had proceeded to hold a
fresh auction it would be apparent that all those who had
come there to bid would still be there, but what happened
was that the liquidators gave time to Nandlal to go home in
the expectation that he would come back with the amount
required to be deposited. In the circumstances it was not
unnatural that the persons who had gathered there to bid
were under the impression that he would bring the money and
make the deposit and as a matter of fact the narration of
facts by the liquidators in their Master’s summons clearly
shows that they themselves were under this impression. In
the circumstances the continued presence of the bidders
there manifestly served no purpose and several of them
therefore left the place and went away. The bidding list
which is Annexure ‘A’ to the petition of the liquidators
showed that New India Transport Co. which had bid up to Rs’
2,55,000/-, Babulal Bhagwandas who bid up to Rs. 2.75,000/-
and Chabildas Agarwal who went up to Rs. 2,85,000/- were not
there when the second auction was held. The result
therefore was that when after waiting for about 20 minutes
the liquidators continued the auction several had left and
the appellant was able to become the highest bidder for the
price of Rs. 2,25.000/-. This feature of the case was
missed by the I earned Company judge and forms the basis of
the decision of the Division Bench. We would go further and
add that on a proper construction of condition 5 the
liquidators were not entitled to proceed with the sale in
the circumstances that happened because of the interval of
time they granted to Nandlal to make the deposit which gave
the impression to those who gathered there that there would
be no further auction on the same date at which they were
entitled to bid. Learned Counsel for the appellant referred
us to the fact that one S.K. Chakrabarti who in the first
auction had bid up to Rs. 2,98,000/- was present at the
resumed auction and that he bid then only for Rs. 2,00,000/-
and that
740
this feature of the resumed auction was not noticed by the
learned judges in appeal. We consider that this is not a
very relevant circumstance for a decision of the question
either as regards the power of the liquidators to hold the
fresh sale without advertisement or whether the sale at the
resumed auction had been at an undervalue. It is possibly
profitless to speculate how or why it happened that persons
who half an hour earlier had been willing to bid for much
,larger figures suddenly permitted the appellant to become
the purchaser for Rs. 2,25,000/- . It may be mentioned that
at the resumed bidding there were only six bidders of whom
three had not bid at the earlier auction at all, though
apparently they were present-Shantilal Bansidhar, Power &
Machinery Construction Co., and Relay Corporation. Besides
these three, there were only two others-Mahabir Prasad who
had earlier bid for Rs. 2,10,000/- and now contented himself
with a bid for Rs. 1,90,000/-and S.K. Chakraborty who though
originally thought that the property was worth having for
Rs. 2,98,000/now refused to go beyond Rs. 2,00,000/-. These
facts show that if those others who had gathered there at
the beginning of the auction but who left the place under
the impression that Nandlal would make the required payment
had continued there, the appellant’s bid for Rs. 2,25,000/-
would not have been the highest bid. We consider therefore
the learned judges of the Division Bench were justified in
considering that the sale to the appellant ought not to have
been confirmed.
There was one further point made by learned Counsel that
when the learned Judges allowed the appeal of the respondent
they should not have directed a resale of the property by a
fresh auction but should have confirmed the sale to the
appellants at the price of Rs. 3,35,000/- which was the
amount of their bid at the first auction. The basis of this
argument was the undertaking which
741
they gave at the time of the disposal of the application for
interim stay pending the hearing of the appeal. We have
already extracted the terms of that undertaking. It is not
easy to ‘find any legal basis for this argument. It is true
that in the event of the appeal being allowed the Court
might have, possibly with the consent of the 1st respondent
before us, insisted upon the appellant taking the property
for Rs. 3,35,000/- but that surely cannot give the
appellants any legal right to insist that the property be
sold to them. It, was a condition for the grant of the
indulgence of stay and by no stretch of language could that
be read as implying that the appellants had a right to
purchase the property. It is true that the appellants have
made a grievance about this matter in the application for
leave to this Court as well as in the statement of the case
but that hardly improves the position.
This matter may also be looked at from a slightly different
point of view. Immediately Nandlal failed to turn up on
September8, 1956 the liquidators enquired of the appellants
whether they were willing that their penultimate bid be
treated as the highest bid and they be declared purchasers.
This offer was refused as apparently they were satisfied
that they would be able to get the property for a much less
sum. Thereafter the liquidators took out a Master’s summons
seeking sanction of the Court for the sale to them for Rs.
2,25,000/-. The appellants supported that application. In
other words, they wanted that the Court should confirm the
sale to them for Rs. 2,25,000/- and that was the order which
they obtained from the learned Company judge. It’ was only
when the appeal. was filed and an application for stay was
moved before the appellate court by the 1st respondent here
that the offer which is embodied in the undertaking was.
made. In the circumstances it is difficult to see what
justification there is for the contention that the learned
judges
742
should, when they allowed the appeal, have, confirmed the
salt to them for Rs.3,35,000/-. We consider there is no
substance in this submission.
The result is the appeal fails and is dismissed with the
costs of the 1st respondent.
Appeal dismissed.